Connecticut One Of 12 States Recording Drop In Economic Output In 2008

While the nation's economy fell into its worst recession in at least 25 years, only 12 states saw their own total economic output fall last year, a new report shows. Connecticut was one of those states.

Connecticut's output, the total value of goods and services produced here, fell by 0.4 percent in 2008 compared with 2007, primarily because of a slowdown in manufacturing and construction, but also because of the market crisis that slashed jobs and income in its financial sector, according to a report released Tuesday by the U.S. Bureau of Economic Analysis.

Local economists were quick to fault the figures Tuesday, saying that Connecticut's declines are skewed by its foundering financial sector, which has led to a large loss of income but not necessarily an equal loss of output. And they said total state output is less significant than the drops posted by other states because Connecticut has long been considered a state of low job growth and high incomes.

"In a state like Michigan, the decline comes off the top of an already weakening economy," said Nicholas S. Perna, economic adviser for Webster Bank. "In Connecticut, it comes off the top of a rather well-performing economy."

The state's gross domestic product had in fact grown by 2.4 percent in 2007, according to Tuesday's report.

Alaska saw the largest drop of all states in real (inflation-adjusted) GDP last year, falling 2 percent, mainly because of a scale-back in oil drilling, the report said. North Dakota claimed the fastest economic growth last year, growing twice as fast as nearly all other states — a testament, economists said, to its agriculture, forestry, fishing and hunting industry.

Just how meaningful last year's GDP figures are is arguable.

Perna described it as "tuning in to a weather forecast that tells you what happened yesterday" and warned that an upturn in GDP doesn't necessarily signify a healing job market.

"Companies are loath to hire people until they know the recovery is for real," he said.

The state's output of nondurable goods fell by 0.47 percent, and the output of its finance and insurance industry fell by 0.36 percent, according to the report, which is based on national GDP figures broken down by state based on income.

Although economists have predicted that GDP will start picking up late this year, they don't expect employment rates to begin recovering until the second half of next year.

"The GDP numbers are just not going to give you a true picture of what's going on in the state," said Ed Deak, an economics professor at Fairfield University.

Tuesday's report is a "red flag confirming all of our analysis over the last several years that proves Connecticut is a declining economy," UConn economist Fred Carstensen said.

"It lays out Connecticut's vulnerability to the financial services sector," said Carstensen, director of UConn's Connecticut Center of Economic Analysis. "We haven't seen job creation for 20 years. We have a shrinking labor force of declining quality. This is part of a long-term erosion."